May 3, 2013
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The Federal Reserve in Washington, D.C. / Jack Gruber, USA TODAY

by Kim Hjelmgaard, USA TODAY

by Kim Hjelmgaard, USA TODAY

Stocks tumbled Wednesday morning after weaker-than-expected economic reports, then came off session lows after the Fed's afternoon announcement that it will stay the course on its fiscal policies . . . and then continued tanking as the day wore on.

At the 4 p.m. ET close, markets were at or near session lows, with the Dow Jones industrial index, S&P 500 and Nasdaq composite all down 0.9% each. The Dow lost 139 points, ending up at 14,701.

The Fed announced about 2 p.m. that it would keep rates steady and keep buying $85 billion a month in Treasury bonds and mortgage-backed securities until the job market improves substantially.

Investors also digested a flood of earnings reports, including solid results from top automakers, and waiting for the Federal Reserve's announcement after the conclusion of a two-day monetary policy meeting.

As investor worries grow that the market is due for a downturn, demand for U.S. Treasuries increased. The yield on the 10-year government bond fell to 1.62% as the price, which moves inversely to the yield, soared. As recently as March 8, the yield on the benchmark bond was at 2.1%.

On Tuesday, the Dow rose 0.1% to 14,839.80. The S&P 500 rose 0.3% to 1,597.57, hitting a record high close for the second straight day. The Nasdaq composite index rose 0.7% to 3,328.79.

Asian stock markets fell Wednesday in holiday-thinned trading after the pace of China's manufacturing growth slowed in April, raising fears of a weaker recovery in the world's second-largest economy.

The weak economic reports out of the U.S. and China pushed crude oil prices sharply lower. Benchmark oil for June delivery was down 2.5% to $91.10 per barrel in electronic trading on the New York Mercantile Exchange. Earlier this week, the oil futures contract were trading above $94 a barrel.

As more signs of a slowing economy emerge, fears that the Fed's ongoing "easy money" policies will ignite inflation fears are subsiding. On Wednesday, the price of gold was 1.4% lower to $1,451. In mid-November, the price of gold was above $1,800 per ounce.

Japan's Nikkei 225 index fell 0.4% to 13,799.35. Many stock markets in the region were closed for May Day holidays, including those in Hong Kong, mainland China, South Korea, Singapore and Taiwan.

In Europe, Britain's FTSE 100 index closed up 0.3% to 6,451.29. Trading was closed in Germany and France for May Day celebrations. Markets across Europe are looking ahead to the European Central Bank's monetary policy decision set for Thursday.